British airline EasyJet on Tuesday said it took a sizeable financial hit from sector-wide disruptions, notably staff shortages, but still slashed quarterly losses as demand recovers.
As airport staff shortages spark flight cancellations, EasyJet said in a statement that it booked a one-off charge totalling £133 million ($160 million).
That saw the airline post a pre-tax loss of £114 million in the group’s third quarter, or the three months to the end of June.
However, that marked a major improvement from a loss of around £318 million for the same period of last year, as travel demand picked up from a Covid-induced downturn.
Third-quarter revenue increased more than eight-fold to £1.8 billion, while traffic rebounded close to pre-Covid levels.
EasyJet chief executive Johan Lundgren said the carrier was hit by “short-term disruption issues”, but that it was experiencing “the return to flying at scale”.
Traffic surged more than seven-fold to 22 million passengers in the quarter after the lifting of Covid travel curbs.
That was almost 90 percent of the group’s 2019 capacity, before the pandemic ravaged the global aviation sector by grounding planes worldwide.
EasyJet said “the unprecedented ramp-up across the aviation industry, coupled with a tight labour market” had caused “widespread operational challenges culminating in higher levels of cancellations than normal”.
Despite the disruption, EasyJet operated 95 percent of its planned schedule in the quarter.
Airlines and airports are struggling to recruit staff having sacked thousands of workers as the world entered Covid pandemic lockdowns.
VW’s new CEO faces twin challenges of Porsche, software problems
When Oliver Blume ascends to the top job at German automaker Volkswagen in September, he will be faced with taming the challenges that led to the fall of his predecessor, Herbert Diess, last week.
Serial technical troubles at Europe’s largest carmaker, as well as fractious relationships with workers’ representatives spelled the end of the road for Diess as chief executive, who was ousted in a supervisory board coup.
Blume is moving up from Porsche, VW’s premium sports car brand, which is set to go public later this year during a turbulent time for markets.
In his four years at the helm of Volkswagen, 63-year-old Diess steered the legacy carmaker out of its 2015 “dieselgate” emissions-cheating scandal onto an ambitious programme to become the world’s biggest electric car manufacturer by 2025.
But difficulties at VW’s software arm, Cariad, a pet project of Diess’s, have delayed key plans and made it harder to catch up with competitors like US manufacturer Tesla.
Software is the “number-one challenge”, said Matthias Schmidt, an auto analyst based in Berlin.
Bringing software development in-house, shedding outside suppliers and keeping control of computing architecture of the car, is difficult to achieve, but has potentially huge financial benefits.
Blume “needs to decide whether he will continue to follow Diess’s plan” or make a strategic decision to “buy it in” and “live with the consequence of seeing that potential profit centre vanish”, Schmidt told AFP.
“The idea of doing everything in a centralised way will probably be rethought,” said German automotive expert Ferdinand Dudenhoeffer.
– Unanimous vote –
In addition to the troubles at Cariad, Diess’s position as CEO was weakened by running battles with workers’ representatives.
The tendency of Austrian-born Diess to rub people up the wrong way and the proliferation of internal spats were the main reason for his exit, according to a source at the carmaker.
There were no dissenters on the vote to finally eject him, just before the start of the summer holidays.
Diess “had enemies” and was “not liked by the politicians or the works council” represented on the supervisory board, Dudenhoeffer said.
The outgoing CEO’s propensity for conflict was “very important” to get the group to face up to its past and find a new direction, he said.
But the task at hand was to carry out the changes Diess had identified as necessary, not to keep bashing heads together, Dudenhoeffer added.
– ‘Cooperative’ –
Blume is likely to steer clear of the provocative comparisons with US competitors and strongly worded tweets that won Diess few friends.
The new chief, who has spent his entire career at Volkswagen, is more “cooperative” than Diess, who was hired from rival German carmaker BMW, Dudenhoeffer said.
Chief financial officer Arno Antlitz will bring continuity to the top team at Volkswagen, adding chief operating officer to his portfolio of roles.
Blume will “continue Diess’s big strategic projects”, said Dudenhoeffer, including making VW’s own batteries, building a modern factory close to its headquarters in Wolfsburg and developing mobility services with the reacquisition of rental company Europcar.
Blume will take the steering wheel of the group on September 1, while also retaining his CEO role at Porsche, which is set for a stock market entry in the last three months of 2022.
Blume would likely stay at Porsche through the flotation before having to “concentrate on managing the VW group machine”, said Schmidt.
The future CEO “will be judged on VW’s success in China” and the US, two key markets where Volkswagen has struggled in recent times, said Dudenhoeffer.
China’s ‘Silicon Valley’ tightens rules over Covid flare-up
China’s biggest tech hub is rushing to stamp out a fresh Covid outbreak, ordering some of the country’s biggest manufacturers to operate in a ‘closed loop’ to reduce infections, state media reported.
The city of Shenzhen, which borders Hong Kong, reported just 19 Covid cases Tuesday as the city’s health authority said the risk of “large-scale spread is low”.
But Beijing’s reluctance to budge from its strict zero-Covid policy had led to daily mass testing for the 13 million residents of Shenzhen for over a week and the closure of at least three subway stations by Tuesday.
Top manufacturers including iPhone maker Foxconn, electric carmaker BYD, drone maker DJI and telecom equipment maker ZTE are among the companies told to operate under a “closed-loop” production system.
It would restrict movement of employees for seven days, state-run business news site Yicai reported Monday.
The closed-loop operation mode involves control measures such as locking workers within a compound and conducting daily nucleic acid testing.
Bloomberg News reported Tuesday that a government notice told companies to reduce unnecessary interaction between non-manufacturing staff and factory floors to curb infection.
Health officials had earlier said all cases found in Shenzhen from July 15 were infected with the highly contagious Omicron subvariant BA.2.
While it is expensive and reduces the scale of production, manufacturers — including Tesla’s site south of Shanghai in the past — have opted to operate in a closed-loop instead of resorting to full shutdown during local Covid flareups.
Strict virus controls have threatened global supply chains and cooled China’s economy with Q2 growth coming in at a dismal 0.4 percent — the weakest growth since the pandemic started.
China reported 976 covid cases Tuesday, with the biggest outbreaks reported in the southern Guanxi region and Gansu province in the northwest.
Egypt’s small farms play big role but struggle to survive
Egyptian smallholders grow nearly half of the country’s crops, a lifeline role increasingly important after grain imports were stalled by war in Ukraine — but they are struggling to survive.
Despite their crucial role providing food for the North African nation’s 103 million people, smallholders are cash-strapped and indebted, frequently selling their harvests at a loss.
“The farmer is dead, trampled,” farmer Zakaria Aboueldahab told AFP, brewing tea on his rented plot of wheat and onions in Qalyubia, 30 kilometres (18 miles) north of Cairo.
“I’m trying to sell my onion harvest but I can’t find a market,” he said, the remnants of his crop scattered across the soil. “I just want to break even. I don’t know how I’m going to pay rent”.
His onions would sell in Egypt: but financing, marketing and infrastructure hurdles create massive gaps between supply and demand.
According to the United Nations Food and Agriculture Organisation (FAO), small farms are the “primary producers” of food for domestic consumption in Egypt.
Farmers cultivating less than three feddans (1.2 hectares, three acres ) — an area the size of a football pitch — till 35 percent of arable land.
Yet they produce some 47 percent of Egypt’s field crops, the FAO calculates.
Larger farms focus more on exports -– a dynamic that came to a head when Russia invaded Ukraine.
– ‘Patriotic duty’ –
Egypt, the world’s leading importer of wheat, relied on Russia and Ukraine for 80 percent of its imports, providing the flour for Egypt’s traditional flat bread.
Ordinary Egyptians eat bread at almost every meal, and Egypt’s wheat farmers ramped up production to 40 percent of the country’s needs.
“Without the 40 percent of wheat that we produce domestically,” rural sociologist Saker al-Nour told AFP, the consequences of the war “would be much worse.”
In March, Cairo ordered farmers to grow wheat, calling the “compulsory delivery” orders a “patriotic duty.”
By June, farmers had provided more than 3.5 million tonnes, according to the supply ministry, over half the domestic supply goal to August, and equal to the total amount supplied in 2021.
Compulsory crop deliveries were a pillar of president Gamal Abdel Nasser’s socialist policies in the 1960s, but those policies were dropped amid the structural adjustment programmes of the 1990s.
With them went the former subsidies on seeds, pesticides, and fertilisers which have steadily shrunk over the decades.
“Instantly, when things got tough, it went back to compulsory delivery, but this time without the services that came with it,” Nour said.
To encourage farmers to grow wheat, the government had previously set domestic prices higher than imports.
But the unprecedented surge in global prices undermined that.
– Stronger together? –
“Now I owe money to the pesticide guy, to the fertiliser guy,” Aboueldahab said. “So if someone comes along and bids a low price, what am I supposed to do?”
One solution is for smallholders to join together and harness the power of technology.
Entrepreneur Hussein Abou Bakr launched a start-up finance company called Mozare3, ‘farmer’ in Arabic, which offers farmers financing solutions and agronomy support.
It also helps farmers “become a bloc”, in the absence of effective local cooperatives and sets prices “as a form of protection” against market fluctuations.
Nour warns smallholders have “very limited negotiating power, especially when they don’t have the storage capacity for their harvest”.
But with illiteracy among smallholders at 32 percent, according to the FAO, offline village associations are necessary.
As climate change bites, Nour warns bottom-up approaches are essential.
These associations could, for example, communicate extreme weather events quickly and directly to farmers whose crops are at risk.
These tools exist, the sociologist said. “We just need to make them available to small farmers.”
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